Blog Post

Should you have different will trusts for different family members?

  • by LevLaw Ltd
  • •
  • 03 Sept, 2020
  • •

What is a will trust?

A will trust is a trust created within a person's will and is a relationship between three parties:

  • the testator settlor is the person transferring assets into the trust
  • the trustees are the persons who hold the asset for the benefit of a third party
  • the beneficiary is the person who benefits from the trust

However, when it comes to helping family through trusts in wills, the ‘testator’ (the person making the will) needs to consider the impact of family law and taxation.

How does divorce affect trusts?

The matrimonial courts, for example, have powers during divorce cases to make financial settlement orders based on a person’s wealth, not just in their own name but also assets put into trust for them. While the court cannot force trustees to make provision from the trust to the beneficiary to meet their financial settlement obligations on divorce, they can use ‘judicial encouragement’ when they have explored the nature of the trust and the history of distributions made.

Nuptial settlements are made primarily for the benefit of one family member and their spouse and issue. If the key beneficiary is the one getting divorced and they have been used to having all their requests for funds met by the trustees then it is highly likely the matrimonial court will take the trust fund into account when making their order for financial settlement on divorce.

It is therefore risky to separate an ‘estate’ (money, property and possessions) between siblings, leaving each a share in their own trust, rather than leave the whole estate in a single trust for the benefit of a wide range of beneficiaries, such as all the siblings, their spouses or civil partners and their issue. This sort of trust is unlikely to be regarded as a nuptial settlement and therefore would not be considered on any beneficiary’s divorce.

How does inheritance tax affect trusts?

While inheritance tax applies to an estate on death, it also applies going forward to trusts created under the will. The rule is that any trusts created by a will are deemed to start for inheritance tax on the date of death.

Where a settlor creates trusts on the same day they are known as ‘related settlements’ and this means they must be added together when calculating inheritance tax charges on each trust in the future.

Should I create separate trusts for different members of my family?

If the family wish to have separate trusts for different branches of the family, and still wish to use the pilot trust system to achieve this, it should be considered that there is not a great deal of inheritance tax saving and there are also potential family law issues. The costs of administering numerous trusts and complying with complex regulations are also increased.

It therefore makes sense for many clients to have one discretionary trust in the will which benefits all siblings and their families. Inheritance tax will be charged on the total relevant property, so there is no tax saving, but there will be some family law protection and hopefully less administration costs.

Top 10 reasons as to why you should get a will...

by LevLawLtd • 5 November 2020
What is a will?
A will is a legal document you create that sets out instructions for who will inherit your estate and what should happen after you die. It includes what sort of funeral you would like, how you would like your possessions to be distributed, as well as other wishes, like who should bring up your children, if you have them. Sometimes known as your last will and testament, it's a legally-binding document - but if you don't prepare it properly, it may not be valid. You are free to write your will yourself, but if you have a complicated estate, or simply want help, you can enlist the support of a solicitor or expert will-writer. As many as 60% of people don't have wills, by some estimates. If you die without one, your estate will be distributed according to strict rules, meaning the people you care about may lose out.

Here, we look at some of the top reasons for making a will, and how dying without one could affect your loved ones.

1. Make a will to name your children's guardian

2. Ensure your children are provided for financially

3. Provide for your dependents, including step-children

4. Protect your partner if you're unmarried

5. Safeguard your family home

6. Head off family disputes

7. Avoid paying more inheritance tax than you need to

8. Create a legal will if you're recently married

9. Decide who you would like to settle your affairs

11. Protect your digital assets

Million of adults refuse to discuss their will with loved ones...

by LevLaw Ltd • 16 October 2020

Making a will is very important if you care what happens to your money and your belongings after you die, and most of us do. But have you tried to talk with your parents about their will? If that conversation isn’t happening, you’re not alone.

And it’s not only parents that are the only ones who are uncomfortable. Adult children may also be nervous about raising the topic of their parents’ finances for fear they appear greedy or nosy. Understandably talking about dying can be seen as ‘taboo’ and it is not always easy to bring it up. However, discussing your will with beneficiaries means they are better prepared when the time comes.

However, worryingly almost six and half million adults refuse to discuss their will with loved ones according to new research. A quarter of people with a will say they will not discuss it as they do not want to think about dying and one in four do not want to upset beneficiaries by discussing the contents of their will.

It is also hugely important for family members to be aware of vital decisions in your will, such as who will look after your children. By overcoming ‘death anxiety,’ the natural fear of talking about death and the emotions associated with it, these important conversations can ensure your beneficiaries are aware of your wishes and understand them.

Nearly half of UK parents, the research identified, with adult children believe their will is ‘no one’s business’ but their own or a partners. But sharing the contents of a will makes the financial and practical consequences of death easier for those left behind. Losing someone can have a huge impact on finances for months or even years to come, so it is crucial for families to be prepared.

Why you should make a will and what happens when you don't...

by LevLaw Ltd • 16 October 2020
Your will tells everyone what should happen to your assets after you die (all these things together are called your ‘estate’). If you don’t leave a will, the law decides how your estate is passed on – and this might not be in line with your wishes.

Four reasons why you need a will...

  1. A will makes it much easier for your family or friends to sort everything out when you die – without a will the process can be more time consuming and stressful.
  2. If you don’t write a will, everything you own will be shared out in a standard way defined by the law – which isn’t always the way you might want.
  3. A will can help reduce the amount of Inheritance Tax that might be payable on the value of the property and money you leave behind.
  4. Writing a will is especially important if you have children or other family who depend on you financially, or if you want to leave something to people outside your immediate family.

Don’t delay

It’s easy to make a will – and it will save your family unnecessary distress at an already difficult time.

What happens if you don't leave a will?

If you don’t have a will when you die, your money, property and possessions will be shared out according to the law instead of your wishes. This can mean they pass to someone you hadn’t intended – or that someone you want to pass things on to ends up with nothing.

When you die without leaving a will, the law decides who gets what and how much.

It doesn’t matter what your relationship with those people was like when you were alive.

By leaving a will that says clearly who should get your property and money when you die, you can prevent unnecessary distress at an already difficult time for your family or friends.

Some parents have had to sue their own children to get a share of their partner’s estate when their unmarried partner dies.

The law says that in this situation the children get everything.

Seven things your estate plan may have missed...

by LevLaw Ltd • 30 July 2020
Estate planning and will writing are among the easiest financial-planning to-do lists to put off. Making sure you have the key estate planning documents in place is important; that means a will, powers of attorney for healthcare and financial matters, and guardianships for minor children, first and foremost. Trusts may also make sense in certain situations. But there are other add-ons to think about too, especially if your goal is to make life as easy for your loved ones as possible and to ensure that your wishes are carried out after your death. And, unlike a traditional estate plan, you can craft at least some of these documents on your own, without the aid of an attorney.

1. A Financial Overview
Create a master directory for your loved ones, covering everything from bills to bank accounts. (These documents can also come in handy if you’re the main financial decision-maker in your household and your spouse doesn’t pay too much attention.)

2. A Master Directory
Think of a master directory as the detailed version of your financial overview. Because the master directory includes sensitive information, it’s crucial to encrypt it or, if it’s a physical document, to keep it under lock and key.

3. A Plan for your Personal Property
Most wills will state that any tangible personal property, like furniture, should be sold and the proceeds added to your estate. But if you have sentimental or valuable items that you’d like to earmark for specific individuals, such as jewellery or artwork, you can also specify who you would like to inherit those items.

4. A Plan for your Pets
If you’re an animal lover, you know that pets aren’t possessions; they’re part of the family. Thus, more and more estate plans include provisions for furry friends. There are a few ways to incorporate pets into an estate plan: the gold standard, albeit one that entails costs to set up, is a pet trust. Through such a trust, you detail which pets are covered, who you'd like to care for them and how, and leave an amount of money to cover the pet's ongoing care.

5. A Digital Estate Plan  
Even people who think they've ticked off all the usual boxes on their estate-planning to-do list may have overlooked an increasingly important component of the process: ensuring the proper management and orderly transfer of their digital assets.   Just as traditional estate planning relates to the management and transfer of financial accounts and hard assets, digital estate-planning encompasses your digital possessions such as data stored on devices or in the cloud and social media accounts.
6. A Plan for the End of Life
While an advance directive (or living will) details your attitude toward life-extending care, these tend to be fairly generic. If you’d like to add additional background for your spouse, children, or other loved ones who might be making healthcare decisions on your behalf. It's also worthwhile spelling out your wishes for funerals, memorials, and the disposition of your body, either verbally, in writing, or both - even if your wishes are simply to let your loved ones decide.

7. An Ethical will
Last but not least, consider writing or recording an ethical will that spells out your beliefs and values. In contrast with a conventional will, which lays out how you’d like your financial and physical property to be distributed, an ethical will is a way to "hand down" your belief system to your loved ones.

Making a will: 10 things you should know

by LevLaw Ltd • 24 April 2020
More than half of British adults have not made a will.  Of those who have, many have not updated their wills for some time, which is reflected in the soaring number of inheritance disputes heard in the High Court. Dying intestate — the legal term for not leaving a will — can leave considerable costs and complications for people left behind to deal with, alongside the heartache of grieving.

Despite this, research estimates that over 30m people in the UK have still not got around to formalising their intentions. It is so important for people to seek appropriate advice and review their wills on a regular basis — particularly on the occasion of any major life event.

To help you write your will, so that your estate passes to the people you intend, here are 7 things to consider:

1 Getting married affects your will
The thought of what happens when you die is unlikely to be the first thing to spring to mind when you walk down the aisle, but it is important to remember that all previous wills are revoked from the day you say “I do”. Unless you make a will following your marriage, the rules of intestacy apply.

2 Review your will if you get divorced
It is always a good idea to review your will at key stages in your life. But contrary to popular belief, when you divorce, your existing will remains valid. For inheritance purposes, your decree absolute has the effect of removing your former spouse from the will completely, although named executors and other beneficiaries will remain valid. Be aware that this rule only applies to legally divorced couples.

3 A common law partner will not automatically benefit when you die
There is a growing shift towards couples choosing to live together and have a family. However, no provision is made in the intestacy rules for unmarried partners. There is also no such thing as a “common law” spouse in England and Wales — a partner is not deemed to be a “spouse” for intestacy purposes unless a couple are legally married or in a civil partnership. Similarly, no provision is made for stepchildren on intestacy, unless they are formally adopted. You need to make a will if you want your cohabiting partner or stepchildren to benefit from your estate. You can also think about owning assets — property or bank accounts — jointly, so that the survivor inherits that asset automatically.

4 Check your will has been drawn up correctly
The requirements for what makes a will valid varies from country to country. In England and Wales, a Post-it note with your wishes written on it can be sufficient to count as a will, provided it is executed correctly. The formal requirements for making a will are that it must be in writing, signed by a testator — or signed by someone else at the testator’s direction — in the presence of two witnesses, who also sign the will. A valid will could be written on the back of a dirty napkin provided that it was signed by the testator and witnessed correctly. The signature still has to be handwritten, however. Many companies are now offering to produce wills online, but for a will to be valid, it still needs to be printed and signed by hand.

5 Your mental capacity will affect your ability to make a legitimate will
This is becoming more of a common issue due to the ageing population — another good reason to make a will, and set up a Lasting Power of Attorney (LPA). It is possible to make an application to the Court of Protection — which has jurisdiction over a person’s affairs once they have lost mental capacity — to authorise a “statutory will” for an incapacitated person. The court is usually willing to authorise this in circumstances where the individual has either never made a will or their circumstances have significantly changed — for example, family members who benefit under a pre-existing have died or assets have significantly changed. The court is also able to authorise lifetime gifts from the incapacitated person’s estate.

6 Your will can be challenged when you die
There are rules which determine which family members receive a share of your estate if you do not make a will, but there are no rules. In theory, you could give all your estate to one person or to a charity and not to your spouse, other family members or dependants. However, in England and Wales there is a statute that allows certain people to claim financial provision from an estate where they have been left nothing or too little. If someone feels they did not receive reasonable financial provision from the deceased’s estate, they may be able to bring a claim to benefit from the estate under the Inheritance (provision for family and dependants) Act 1975. A claim can be brought by a wide variety of people including a spouse, former spouse, people living with you, children including adult children or someone who was maintained by the person who has died. Be aware that claims brought by anyone other than a spouse will need to demonstrate financial need.

7 Donating to charity via your will can reduce your tax bill
People often leave charitable gifts in their wills, but it is not widely known that this reduces the amount of inheritance tax that will need to be paid on their estate. Those giving away 10 per cent of their net estate will reduce the rate of inheritance tax they would have to pay on the remainder of the estate from 40 per cent to 36 per cent.

Protecting Your Family Inheritance

by LevLaw Ltd • 3 April 2020
But this will not happen for many , unless careful arrangements have been made to protect their assets from being taken towards the end of their life to pay for care home fees. The solution to help protect your estate is a Will incorporating a Property Protection Trust (PPT) .

A testamentary PPT can only be executed whilst both partners remain alive. Upon death of the first partner, their Will specifies that their share of the property is placed into trust and names the ultimate beneficiary of this share, normally the children and grandchildren of the deceased. The surviving partner, under the terms of the trust, has the unequivocal right to remain living in the property for the rest of their life.

On the death of the second partner the Trust comes to an end and the property passes to the beneficiaries. As the surviving partner does not own the deceased’s share of the property it is fully protected for the beneficiaries, so if the surviving partner requires care, or even remarries, this share of the children’s inheritance is protected. This last point can be particular interest to couples who have come together and have children with different partners.

A PPT can help each person in a relationship ensuring that their children inherit their share of the property, while giving their surviving partner the ability to live in the property for the rest of their life. If the surviving partner wants to move to another property, they can still sell the property and the proceeds to be used to purchase a new property, the terms of the Trust remain over the new property.

Why You Need a Will

by LevLaw Ltd • 5 June 2019

If you do not have a Will, you have no say over what happens to your assets when you die and this can cause difficulties for those you care about most.

Because of this, everyone should have a Will ; this is particularly true if you own property, are married , have entered a civil partnership or have a long-term partner . It also applies if you have children or other dependants , or if you wish to leave something to someone who is not a close family member.

It is a common belief that, if you are married or in a civil partnership, your spouse or civil partner will automatically inherit everything you own when you die. In fact, the law sets out rules that determine how your assets are to be divided if you should die without leaving a Will .

The rules are intended to be fair, but they may not suit you. For example, if your spouse or civil partner and children survive you, your assets will be divided among them in fixed proportions that may not suit your family. Equally, the rules make no provision for a partner if you are not married or in a civil partnership, even if you have lived together for many years. It is possible to write your own Will, but it is a good idea to seek professional advice.

Your Will is important , and professional advice will ensure that your Will complies with all the legal requirements. A professional service also ensures that your instructions are clear and will be followed after your death, and that you have taken advantage of any tax reliefs available to you.

Who Inherits Your Wealth? What is a Protective Property Trust?

by LevLaw Ltd • 5 June 2019

Do you want your home and wealth to go to your children or other loved ones? Have you ever considered what the effect might be on your savings and investments, or even your home?

Most people assume that their assets will pass on to their children or other relatives in due course, yet this may not always be the case unless careful arrangements have been made to protect these assets from being taken to pay care home fees.

Thanks to advances in medical science and a general improvement in health and fitness, everybody is living longer, though not necessarily able to take care of themselves. Figures show that 1 in 2 women and 1 in 3 men will require long-term residential care at some point in their lives.

A Protective Property Trust (PPT) can be established which will help to protect your estate from being taken to pay for care home fees.

The Property Trust can only be created whilst both partners remain alive . Normally with couples the property is divided 50/50, though these percentages can be different. Upon the first death, their share of the property is placed into the Trust to be administered by the Trustees.

The Will also specifies who is to be the ultimate beneficiary of this share in the property and this would normally be the surviving children of the deceased. The surviving partner, under the terms of the Trust, has the right to remain living in the property for the rest of their life. On the death of the second partner the Trust comes to an end and the property passes absolutely to the beneficiaries. The surviving partner does not own the deceased's share of the property.

If the surviving partner chooses to sell and move to another property the proceeds from the sale can be used to purchase the second property and the terms of the Trust remain over the second property. If there is any excess capital following a sale then the money is invested and the surviving partner can take the interest that is generated as an income.

The deceased's share in the property is fully protected for the beneficiaries, so even if the surviving partner remarries, the children's inheritance is protected. This last point can be of particular interest to couples who have come together and have children from different partners. A PPT can help each person in a relationship ensure that their children inherit their share of the property, while giving their surviving partner the ability to live in the property for the rest of their life.

What will a Living Trust do for Me?

by LevLaw Ltd • 5 June 2019

Everybody wants to protect their assets for the benefit of their family and loved ones. We are all motivated to provide for our children throughout their lives and want what is best for them. Many people will think about or draft a Will hoping to ensure that the assets that they have worked hard for, are passed on to their children and chosen beneficiaries after their death.

However, a Will can only dispose of the assets that you own at the date of your death and if the value of these have decreased during your lifetime, there will be little if anything left for your beneficiaries to inherit.

Lifetime Living Trusts are specifically designed to protect your assets for you during your lifetime . Giving you the peace of mind that your estate can be passed on securely and intact to your loved ones, after your death. 

During your lifetime

Once a Trust has been created, you can use it to 'ring-fence' your assets . Most people will protect their home and their savings, leaving capital in their bank or other savings accounts for ongoing living expenses. Income from savings protected within the Trust can be paid directly into your bank account to supplement income from earnings or pensions.  Assets can be added and removed from the Trust during your lifetime . If you have large expenses that cannot be met out of normal income, like a new car, holiday, or house repairs, the appropriate sum can be transferred to your bank account from the Trust.

You are named as the 'Principal Beneficiary' of the Trust and retain full control of the assets while you are alive. You are free to move home, or release equity from the Trust at any time.  As the Principal Beneficiary of the Trust, you have a guaranteed right of occupation in the property for the remainder of your life. The Trustees, usually your children, cannot evict you under any circumstances.

You can direct the Trustees to sell the property and to buy a new property of your choice. If the new property you are acquiring is more expensive, the Trustees can only be required to buy the new property if the additional capital required is paid into the Trust by you.  The Trust is equally applicable to married couples and to single people.

If you lose mental capacity

If you lose mental capacity, the law states that you are no longer allowed to manage your own affairs. Assets held within the Trust will then be managed by your Trustees on your behalf. Your Trustees can effectively 'stand in your shoes' to make decisions on your behalf but these must be for your benefit . They are able to add or remove assets or use the income from the Trust to help you and improve the quality of your life. Assets held outside the Trust will fall under the control of the courts.

After your death

After your death, the Trust continues to work to protect your assets for your beneficiaries. The Trust can continue to hold the assets safely within it, or pay them out to the specified beneficiaries. The Trust is extremely flexible after your death and has the potential to continue protecting your family for 125 years from the date it was created. That means that all of the benefits described in this document can not only protect you and your children but can also protect your grandchildren and great-grandchildren.

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